How to save money on taxes by being energy efficient


It’s tax season again, and we could all use a break. Luckily there are some financial breaks related to energy saving components of your house or building that you might not have been aware of, recently brought to light by the IRS. Under 179D deductions, you can claim deductions on any project or addition that meets certain green improvement criteria, applicable to projects constructed all the way back to 2006.

Real Estate firm Globest recently published a very informative article about how 179Ds work, and what green features qualify for such a savings.

To summarize, essentially one can claim a deduction based on the evaluation of any or all three of the following building components: The HVAC (heating, ventilation and air conditioning) system, the building envelope and the lighting. These each make up one third of the total deduction, valued at $0.60 per square foot. These savings could potentially total up to $1.80 in deductions per square foot, depending on the efficiency of the component in question. To qualify, the components must be evaluated by a professional engineer or licensed contracter.

In addition to the possibility of deductions, a 30% tax credit is available for any equipment that generates it’s own energy, such as solar panels or fuel cells.

According to Globest, the IRS estimates that less than 1% of existing buildings have gotten deductions because of green additions to their spaces, because they probably think that they need the latest green technology or LEED certifications to qualify. In fact, this is not the case, and to illustrate, we’re providing a few examples of buildings and spaces that have components that would qualify for an efficiency deduction. All of the projects referenced below are part of partial or full remodels.

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Our Melrose House project has a 90% high efficiency water heater as well as LED lights (though we tried to keep energy costs down in general by allowing the space to welcome as much natural sunlight as possible.)

Melrose House and Children’s Dental World both make use of a soy-based spray foam for superior insulation.

Our new meadery project Wild Blossom will have solar panels, accounting for 100% of its hot water energy uses.

Our 2 Sparrows restaurant has high-efficiency HVAC components installed.

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Our addition to Hermitage House employs a shaded south-facing window for passive solar heating that absorbs during the day and releases at night when temperatures cool down.